National Finance Council too lackadaisical and feeble in dealing with the huge RM6 billion unpaid loan arrears owed by states to the Federal Government

Media Statement
by Lim Kit Siang

(Penang,  Wednesday): Deputy Prime Minister Datuk  Seri Abdullah Ahmad Badawi said yesterday after chairing  the first post-election National Finance Council meeting attended by  Menteris Besar and Chief Ministers, or their representatives, as well as Finance Minister, Tun Daim Zainuddin that state economic development corporations (SEDCs) applying for Federal loans must now obtain the approval of their State Governments.

This is  to prevent SEDCs from being over-exposed financially as ultimately State Governments would have to be responsible for them.

While it is  right and proper that the state governments  exercise some control over the  SEDCs' plans, I would have thought the biggest problem that should have been addressed by the National Finance Council is the huge unpaid loan arrears of some State Governments owed to the Federal Government.

All that  Abdullah said yesterday was that the council had also discussed loan repayments by the States to the Federal Government and decided that this would be facilitated by deductions from their allocations.

He said this arrangement would not burden States as the Government was not requesting  immediate repayment.    As at June, the 13 States owed RM8 billion to the Federal Government.

This is a most unsatisfactory and too lackadaisical way of dealing with a RM8 billion problem and more seriousness must be shown by the National Finance Council to resolve the huge unpaid loan arrears by some of the State Governments.

From the endless attacks mounted by Barisan Nasional Ministers  on the Kelantan State Governmentís debts to the Federal Government in the run-up to the last general election, Malaysians would have thought that Kelantan is  the worst state in terms of repaying Federal Government loans.

This is not the case as shown by  the latest Auditor-Generalís Report on the Federal Government 1998 which was  tabled in Parliament in October.

Kelantan State Government did not head the list of state governments with the biggest unpaid loan arrears to the Federal Government as at the end of 1998, which went to the Johore and Kedah state governments which owed the Federal Government in unpaid loan arrears the staggering sum of RM229.78 million and RM225.54 million respectively.

The third state in the list was Sarawak State Government, whose unpaid loan arrears stood at RM86.22 million.  Kelantan came fourth at RM44.88 million, followed by Pahang at RM44.88 million, Terengganu at RM27.34 million and Sabah at RM24.53 million.

The Barisan Nasional state governments of Johore and Kedah should explain why they have the biggest unpaid loan arrears to the Federal Government,  each about five times that of the PAS Kelantan state government, when Barisan Nasional claims to be more competent and efficient than PAS.

The 1998 Auditor-Generalís Report also revealed that there were  six statutory bodies and three government companies whose unpaid loan arrears to the Federal Government as at the end of 1998  exceeded that of the Kelantan state government - in one case by as much as over 20 times!

The six statutory bodies which had unpaid loan arrears to the Federal Government more than the Kelantan State Government at at the end of 1998 were:

Perbadanan Aset Keretapi                RM504.06 million
Bank Pertanian Malaysia                 RM324.83 million
Lembaga Lebuhraya Malaysia              RM160.32 million
Lembaga Letrik Sabah                    RM140.37 million
Lembaga Air Perak                       RM122.69 million
Lembaga  Kemajuan Pahang Tenggara (DARA)RM 61.46 million

The three government companies which had unpaid loan arrears to the Federal Government greater than the Kelantan State Government were:

Perwaja Terengganu Sdn. Bhd.           RM893.46 million
Equal Concept Sdn. Bhd.                RM105.35 million
Bank Pembangunan Malaysia Bhd.         RM 47.71 million

These are most shocking and frightening revelations in the  1998 Auditor-Generalís Report showing a Federal Government which was  careless about its financial responsibilities, where it could allow unpaid loan arrears to total RM712 million for State Governments, RM1,423 million for statutory bodies and RM1,133 million for government companies - totalling RM3.2 billion.

If the past is any guide, the total unpaid loan arrears borne by the Federal Government from state governments, statutory bodies and government companies would have more than  doubled to exceed RM6 billion in the current year which ends in another three days.

Can the Deputy Prime Minister direct the Finance Minister to release the latest figure of the unpaid loan arrears owed to the Federal Government by the state governments, statutory bodies and government companies as at the end of 1999 by the first half of January 2000?

Although Abdullah said  that the National Finance  Council yesterday also looked into the need to streamline procedures, especially in view of the Auditor-General's report which had highlighted several weaknesses, the Deputy Prime Minister had been very coy in not revealing whether the meeting had discussed the  problem of huge unpaid loan arrears by the Johore, Kedah and Sarawak state governments.

Malaysians, as taxpayers, are entitled to know what steps are being taken by the Johore, Kedah and Sarawak state governments to eliminate their mountain of debts by repaying their huge loan arrears exceeding RM540 million by the end of last year, and which might have ballooned to the astronomical figure of exceeding RM1 billion  in the past 12 months.


*Lim Kit Siang - DAP National Chairman